Annual Report 2011 - Mandarin Oriental Hotel Group

34 Mandarin Oriental International Limited
Principal Accounting Policies Continued
A Basis of preparation continued
In addition to the above, the IASB has also issued IFRS 9 ‘Financial Instruments’ (2009) and IFRS 9 (2010) which
are effective from 1st January 2013. However, in August 2011, the IASB issued an exposure draft that proposes to
delay the effective date of IFRS 9, ‘Financial Instruments’, to annual periods beginning on or after 1st January 2015.
The original effective date was for annual periods beginning on or after 1st January 2013. This proposal is a result
of the extension of the IASB’s timeline for completing the remaining phases (for example, impairment and hedge
accounting) of its project to replace IAS 39 beyond June 2011. IFRS 9 (2009) is the first standard issued as part of a
wider project to replace IAS 39. It retains but simplifies the mixed measurement model and establishes two primary
measurement categories for financial assets: amortized cost and fair value. The basis of classification depends on the
entity’s business model and the contractual cash flow characteristics of the financial asset. The guidance in IAS 39 on
impairment of financial assets and hedge accounting continues to apply. IFRS 9 (2010) adds the requirements related
to the classification and measurement of financial liabilities, and derecognition of financial assets and liabilities, to the
version issued in November 2009. It also includes those paragraphs of IAS 39 dealing with how to measure fair value
and accounting for derivatives embedded in a contract that contains a host that is not a financial asset, as well as
the requirements of IFRIC 9 ‘Remeasurement of Embedded Derivatives’. The Group will apply the standard from
1st January 2015.
The principal operating subsidiaries, associates and joint ventures have different functional currencies in line with the
economic environments of the locations in which they operate. The functional currency of the Company is United
States dollars. The consolidated financial statements are presented in United States dollars.
The Group’s reportable segments are set out in note 1.
Certain comparative figures have been reclassified to conform with current year presentation.
B Basis of consolidation
i) The consolidated financial statements include the financial statements of the Company, its subsidiaries, and its
associates and joint ventures.
ii) Subsidiaries are entities over which the Group has the power to govern the financial and operating policies. The
purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an
acquisition include the fair value at the acquisition date of any contingent consideration. In a business combination
achieved in stages, the Group remeasures its previously held interest in the acquiree at its acquisition-date fair value
and recognized the resulting gain or loss in profit and loss. Changes in a parent’s ownership interest in a subsidiary
that do not result in the loss of control are accounted for as equity transactions. When control over a previous
subsidiary is lost, any remaining interest in the entity is remeasured at fair value and the resulting gain or loss is
recognized in profit and loss.
All material intercompany transactions, balances and unrealized surpluses and deficits on transactions between
Group companies have been eliminated. The cost of and related income arising from shares held in the Company
by subsidiaries are eliminated from shareholders’ funds and non-controlling interests, and profit respectively.